Capstone Headwaters released its Construction Services Update this week, reporting that optimism in the Construction Services industry has been supported by an improving backlog of projects and heightened confidence for near-term sales and employment. Following depressed levels at year end, the Commercial & Institutional and Infrastructure segments have experienced a healthy pipeline of projects, with backlog increasing in February to 8.3 months and 9.1 months, respectively, according to Associated Builders and Contractors (ABC). Demand visibility has improved substantially in Q1, evidenced by the Dodge Momentum Index, a monthly measure for nonresidential projects in planning, rising 7.1 percent in February from the prior month, marking the index’s highest reading in nearly three years.
“2021 will be a perfect storm for the mergers and acquisitions industry and result in record setting levels of transactions. Baby boomer owners looking to exit will be taking advantage of their last opportunity to lock in low capital gains tax rates while acquirers will take advantage of record setting amounts of dry powder, low interest rates, and unprecedented levels of federal stimulus to generate continued growth,” comments Darin Good, Capstone managing director and lead contributor to the report.
M&A activity in 2020 trailed prior year levels by 14.5 percent as Q2 experienced a drastic slowdown in transaction volume. However, volume surged in Q4 as buyers returned to the market with 115 transactions announced or completed, far outpacing the prior year quarter. As market turbulence has subsided, many deals previously placed on hold have resumed, lending to robust transaction markets.